By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
April 15, 2020
Applying for a Small Business Administration loan can be a challenging process. Here are answers to the top questions you sent us following last week’s webinar, “Do You Need a Loan?”
This article contains all the questions asked during our Survival webinar series. It includes questions asked during the webinars, as well as those that were submitted afterward.
HERE is a link to a document that will be continually updated as new questions are asked and answered. We are getting new information from the SBA every week. We will update our answers if new information gives a different answer.
Below are the Q&As that have come in so far:
Q: I know the part of the PPP loan is forgiven that is used for payroll as long as you maintain the level, but what happens if in eight weeks the money’s gone? If you then lay off the workers, do you lose the entire loan forgiveness?
A: The SBA is requiring payroll data for the eight-week period only. There has been no guidance from the SBA or other sources about requirements after the eight-week period.
Q: There seems to be some confusion as to whether partnership K-1 income can be included in the PPP loan calculations. The rules state that self-employed individuals are covered, but they ask for W-2s or 1099s in the application, and many partnerships only have K-1 income. Getting this answered by the banks/loan agents has not been successful. Is there a definitive answer to this issue?
A: For anyone other than a sole proprietor, only W2 or 1099 income counts. K1 income does not count. Sole proprietors are covered under the PPP. There is no guidance from SBA on K1 income.
Q: What happens with PPP loan money eligibility [if] the staff is already laid off?
A: The eight weeks starts on the first disbursement of the loan, so just hire them back.
Q: The application does not give the choice of answering yes or no if you provide health insurance and retirement benefits to your employees. Will that cause a delay in your submission and your papers you need to submit?
A: It should not cause a delay in your submission, however, this might impact the amount of money you get in the PPP calculation because those numbers should be included in your one-month payroll number.
Q: What concessions should I expect from my landlord? Deferment or reduction, or both?
A: Expectation is the wrong word. Any reduction in rent is based on your ability to negotiate.
Q: Is it normal for a landlord to ask for business financials for a deferral request?
A: This appears to be a delay tactic. Whatever business you did before the pandemic has no bearing on the economic situation you find yourself in right now.
Q: I am finding from four different banks that you cannot apply for the PPP right now (to be sure you don’t miss out on the money) and hold it for any time at all.
A: The intent of the PPP is to get employees back on the payroll quickly. Many banks have pulled back due to liquidity and volume concerns. Many banks are waiting for clarification from SBA. This may be resolved in the near future.
Q: I found out from my bank that in four hours the funding was gone and I missed out on the PPP. Do you have any banks that are still taking applications, or do we wait and see if there are more funds later?
A: Contact other banks in your area where you have a good relationship (i.e.: you have your business checking, personal checking, savings accounts, business loans, etc). Congress is talking about adding another $250 billion to PPP, but it has not yet become law.
Q: I don’t know if I should reapply tomorrow or not. Do you know if reapplying negatively affects my chance for a loan?
A: Reapplying to the same bank should have no value unless there is new information or you’ve fixed the reason you were denied.
Q: I am aware my lender determines forgiveness qualifications, but assume they are given guidelines from SBA?
A: Yes. The lenders are following the SBA guidelines.
Q: If I take the money and rehire at week seven, can I then cash advance everyone seven weeks to qualify for the eight-week window stipulation? (I am getting my funds 4/19 and won’t realistically reopen until sometime between June 1-15).
A: Since the eight-week period commences upon loan disbursement, and you don’t rehire until week seven, your payroll records will be insufficient to achieve or obtain full forgiveness.
Q: What if the governor has still stated you cannot open. Does that postpone the eight-week start date until we are told we can open again?